Letter to Shareholders

# 2023 Letter to Shareholders ## To the Shareholders of Berkshire Hathaway Inc. Charlie Munger died on November 28, 2023, just 33 days before his 100th birthday. Though born in Omaha, he spent most of his life in Los Angeles. But distance was no barrier to our partnership. We talked frequently, and every conversation made me smarter. > "Charlie gave me the blueprint for what Berkshire has become. He was the architect; I was the general contractor." ## The Munger Legacy [[Charlie Munger]] expanded my vision in ways that changed my life. Before meeting Charlie, I was buying mediocre businesses at very cheap prices. Charlie taught me to buy wonderful businesses at fair prices. This insight transformed Berkshire. Charlie's wisdom extended far beyond investing. He thought clearly about everything—business, human nature, science, history. He had a unique ability to cut through complexity and see the essential truth. I have never known anyone with a sharper mind. Berkshire exists in its present form because of Charlie Munger. Every shareholder owes him a debt of gratitude. I miss him every day. ## Artificial Intelligence Much has been written about artificial intelligence and its potential to transform the economy. AI is undoubtedly a powerful technology. It will change many businesses and eliminate some jobs. However, I am not prepared to predict how AI will affect Berkshire's businesses. Our approach has always been to focus on what we can understand. We do not invest based on technological predictions. What we do know is that our businesses provide essential services. People will still need electricity, transportation, insurance, and consumer products regardless of what AI does. Berkshire's portfolio is weighted toward businesses that provide necessities, not novelties. ## Our Equity Portfolio [[Apple]] remains by far our largest equity holding. At yearend, our Apple stake was worth $174 billion. This represents about 6% of Apple's shares. Apple is a wonderful business. It earns extraordinary returns on capital, has a massive and loyal user base, and generates huge amounts of free cash flow. We intend to hold our Apple shares indefinitely. Our second-largest equity holding is Bank of America. We also own significant positions in American Express, Coca-Cola, and Chevron. These are all fine businesses with strong competitive positions. ## The Importance of Culture Berkshire's most important asset is its culture. This culture has been built over 58 years. It cannot be replicated or purchased. It can only be developed through decades of consistent behavior. Our culture is characterized by: 1. **Trust** — We give our managers autonomy and they reward us with honest effort 2. **Long-term orientation** — We make decisions for the next decade, not the next quarter 3. **Rationality** — We allocate capital based on facts, not fashion 4. **Integrity** — We do what we say we will do [[Greg Abel]] will continue this culture. He has been part of Berkshire for over two decades. He understands what makes us special and will preserve it. ## Intrinsic Value The true measure of Berkshire's worth is **intrinsic value**—the present value of all future cash flows the business will generate. This number cannot be calculated precisely, but it can be estimated. Over time, we work to increase intrinsic value per share. We do this by: - Reinvesting earnings at high rates of return - Acquiring businesses that add value - Maintaining our financial strength - Avoiding actions that destroy value Our goal is not to maximize short-term earnings. Our goal is to maximize long-term intrinsic value. Sometimes these goals conflict. When they do, we always choose the long term. ## Looking Forward Berkshire is built to last. We have: - A collection of wonderful businesses - A culture of integrity and long-term focus - A fortress balance sheet - A clear succession plan The next generation of Berkshire will be different in some ways. [[Greg Abel]] will bring his own perspective and make his own decisions. But the core principles will endure: rational capital allocation, financial strength, and a commitment to building value over decades. I am optimistic about Berkshire's future. The foundation we have built is solid. The businesses we own are strong. The people who lead them are talented and honest. And the culture that binds everything together is durable. Warren E. Buffett February 2024